Hello Armando,
Yes I do like the subject to strategy, as it saves a lot of the hassles of getting finance for us foreign aliens! Especially while starting out building the portfolio fast over there.(this is why it is a big benefit for me!)
Sometimes people just want a buyer to take over the mortgage on their house and pay the mortgage up to date to save from forclosure.(and take the house)This means the buyer gets the house for sometimes as little as 2 to 5K(plus the mortgage)(in the case of if there is a lot of equity in the property a larger fee to the seller can be common too)
And then when people find these in the right areas they then rent them out to cover the mortgage payments and + cashflow too.
It is a really common strategy over seas but i think it gets people in Australia a bit nervous. This is because the property is deeded to the buyer ,(and all the escrow funds i.e. -current insurance and taxes)but the mortgage that the previous owner had on the property
stays current and in their name as before. The only difference is the buyer makes the payments and gets all the benefits.
I have also heard of people doing this strategy because sometimes they have very little money down,therfor if they cant make the deal work they just walk away(although I wouldn?t recommend this as if you do yr research fully u should know whether it will work or not before u put all the effort in to buying the deal!)
Of course the benefit for the seller is they get to keep their credit rating as the property is saved from forclosure.
The slight limit to this strategy for the seller is they often cant get another loan to buy another house while their first mortgage is still current.
A lot of investors though will refinance the mortgage later and pay off the previous mortgage .(a couple of years later when they can realise some extra equity in the property at the same time and get a larger mortgage and keep buying more property)
Many Thanks
